Why You Shouldn’t Add Your Child to Your Bank Account

Over the years we have heard from numerous clients that they have added or are considering adding their grown and trustworthy children to their bank accounts. The motives are varied but seem to revolve around two things:

1. Help with paying bills and generally taking care of life’s demands, and
2. Simplifying the transfer of these assets upon their passing.

While both possess reasonable logic, the results are not guaranteed. Let’s use Jim and Sue, a hypothetical retired couple, as an example. They spend half of their year in Colorado and half of their year in Arizona (not a bad deal!). While in Arizona they’ve thought it would be much easier if their son Jim Jr. could pay some bills back home. Plus, what harm could it bring, it’s all going to him and his sister when they pass. So, without further consideration they went ahead and added him to their bank account as a joint owner.

What Jim and Sue hadn’t considered was that their son was about to go through a very ugly divorce. Under the strain of this event, Jim Jr. failed to get much sleep, on his morning commute one day he hit and injured another driver. One of the unfortunate outcomes in both of these cases is that Jim and Sue’s bank account will now be viewed as Junior’s assets and thus subject to the terms of the divorce settlement and the injury lawsuit. Not at all what they were shooting for when they added him in the first place.

Additionally, they thought it would simplify the passing of their assets upon death to Jim Jr. and his sister. In reality it actually created the risk that Junior can keep his sister’s 50% and since he’s an owner of the account, no one can say otherwise (including his parent’s estate documents).

Obviously, Jim Jr. wasn’t as trustworthy as previously thought and this is an extreme scenario, but it illustrates some of the pitfalls of this decision. So whether you’re looking for help with paying bills or trying to make estate planning simpler there are far better ways to do so than by adding your kids to the title of your assets (bank accounts, vehicles, homes, etc.). If you want to talk about this more please give us a call, we’re here to help!